Thinking about getting a first time home buyer mortgage in Ontario?
It is an exciting feeling to start the search for your first own home, but it can become quite stressful. Buying your first home is a lengthy process, from choosing your real estate agent, to entering the bidding wars, to finally securing the mortgage and actually buying the place you will call home.
First Time Home Buyer Mortgage in Ontario: What You Need to Know
As a first-time homebuyer, you will want to get familiar with numerous programs that apply to your specific situation. Whether it is the tax-efficient way to fund your down payment, a possible rebate you may qualify for, or the minimum amount you need to put down for the purchase of your home, there is information that will help you navigate through the buying process and save you some money along the way.
First Time Home Buyer Programs in Ontario
Here are some of the key programs that will help you out during the process of getting a first time home buyer mortgage in Ontario:
CMHC insurance, or mortgage default insurance, may appear like a strange concept, but it is, in fact, relatively straightforward. If you provide the first time home buyer down payment of less than 20 percent of the home’s value, you are required to purchase a mortgage default insurance. This insurance is not an insurance for you. Instead, it protects the lender in case you won’t be able to make your mortgage payments. The purpose of the CMHC insurance is to make financial institutions more comfortable with lending to individuals who are not able to put a large down payment.
This mortgage insurance is determined as a fraction of the total value of the mortgage:
- In case your down payment is 5% - 9.99%, the required mortgage insurance will be 3.6%.
- If your down payment is 10% - 14.99%, the insurance will cost you 2.40%.
- Lastly, for downpayments of 15% - 19.99%, the required insurance will be 1.80%.
Mortgage default insurance is not available for homes valued over $1 million. Therefore, anyone looking to buy a house over this price must provide at least 20% down payment. In general, in Canada, you are required to put down a minimum 5% of the home purchase price.
However, this rule only applies to homes valued under $500,000. If you are looking to buy a home priced at $500,000 - $1 million, it is important to note that the government of Canada has recently increased the down payment rules. Now, you must put down 5% of the first $500,000 and 10% on the remaining amount between $500,000 and $1 million.
RRSP Home Buyer’s Plan
In case you have not purchased a home or lived in a spouse’s home in the last 4 years, you may be eligible for the federal Home Buyer’s Plan. According to this plan, you may borrow up to $25,000 from your RRSP to fund the down payment, tax-free. Here, it is important to note that the money must be in your RRSP for a minimum of 90 days prior to the purchase of your home.
The advantage of the First Time Home Buyer’s Plan is that generally, early RRSP withdrawals are considered taxable income. With the Plan, these withdrawals are exempt, but you must start repayments two years after the purchase, over a period of 15 years.
Land Transfer Tax Rebate
In case you live in Ontario, British Columbia, or Prince Edward Island, you can receive a rebate on a part of the land transfer tax that you have to pay.
First time buyers in Toronto are also eligible for a rebate on the city’s land transfer tax, on top of the provincial rebate.
First Time Home Buyer Tax Credit
This tax credit, which was introduced in the 2009 federal budget, is intended to give Canadians receiving the first time home buyer mortgage in Ontario an opportunity to recover part of the costs associated with the home purchase. It aids in offsetting inspections, legal fees, and some other similar closing costs. It is a non-refundable credit valued at $750.
GST/HST New Housing Rebate
The GST/HST Rebate is available to Canadians who buy a new-built home, significantly renovate a home, or rebuild a home that has been destroyed as the result of a fire. In any case, a GST/HST will be added up to the purchase price. The GST portion can then be rebated to all qualifying Canadians.
First Time Home Buyer Down Payment in Ontario: How Much?
In simple terms, the more you can manage, the better. Paying more cash upfront means paying less with your mortgage, and, therefore, paying less in interest rate. In addition, when your down payment is 20% or above, you are not required to buy the mortgage insurance and pay monthly insurance premiums.
That being said, saving up 20% of a home price is not an easy task - and is nearly impossible in expensive cities like Vancouver or Toronto. The best course of action would be to assess your budget, and decide on the amount that will not put too much strain on your financial situation, while meeting your homeownership goals.
Before applying for a first time home buyer mortgage in Ontario, ask yourself these questions:
- How long can you wait to buy a home?
- Can you put it off a little longer to save up more for the down payment?
- Would you rather buy right now, considering the real estate market prices in your region?
Buy Your Dream Home with KeyRate Mortgage
Tired of paying your hard earned rent to your landlord? Have you made some savings and have a sufficient down payment for your own property? Regardless of what your situation is, I can make the buyer process simple and worry-less of you and take care of all the financing specifics, so you can focus on finding the perfect home as soon as possible. I am here to help you beat the banks… Contact us today.
Each application for first time home buyer mortgage in Ontario is unique, and I will help you deal with the numbers, so you can remain focused on searching for properties within the approved price range. You and your real estate representative will know what to look for, as you will know exactly what price you can comfortably afford. In addition, you will be confident with a locked in rate - at no additional cost for you!
Contact us today for the best mortgage advice & assistance, lowest mortgage rates, and a FAST mortgage pre approval!
We also offer:
- First time home buyer mortgage in Ottawa
- First time home buyer mortgage in Vancouver
- First time home buyer mortgage in Victoria
- First time home buyer mortgage in Calgary